India companies now seek to raise debt overseas

India companies now seek to raise debt overseas

Mumbai: Although Indian firms have in the recent past raised funds through initial public offerings (IPOs) and selling securities to institutional investors, a clutch of them are now looking at external commercial borrowings (ECBs).

The companies seeking the ECB route are wind turbine maker Suzlon Energy Ltd, state-run Shipping Corp. of India Ltd (SCI), India’s largest shipping firm, and Delhi International Airport Pvt. Ltd (DIAL), which operates the country’s second-busiest airport, people familiar with the developments said.

Suzlon is looking to raise $700 million (Rs3,262 crore) to be repaid in three-six years, SCI wants between $200 million and $300 million for 8-10 years and DIAL is likely to borrow $300 million for 8-10 years, the people said on condition of anonymity.

All three are likely to use the money to fund ongoing capital expenditure and government-owned State Bank of India could be managing the borrowings, they said.

This new-found affinity for ECBs stems from a declining dollar and falling rates in the global market. Dollar funding has become cheaper than rupee loans, especially for companies with dollar revenues.

Diversification of fund sources is another reason. With many firms seeing a lukewarm listing in recent times, experts said they could be worried that future IPOs and follow-up public offers may not receive a warm welcome. So they are increasingly looking to raise funds through the overseas debt route.

Even financial institutions are looking to raise money through ECBs. IDBI Bank Ltd could be looking at raising $225 million, the people said. This loan, they said, is likely to be priced at 235 basis points above the London interbank offered rate, which is the daily reference rate at which banks borrow unsecured funds from other banks. One basis point is a hundredth of a percentage point. Royal Bank of Scotland Group Plc, Australia and New Zealand Banking Group and Deutsche Bank AG are likely to syndicate the IDBI loan, the people said.

Experts said more companies could soon line up to use the ECB route to raise much-needed capital, especially as the equity route does not look attractive at present.